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April 26, 2012

BlackRock to Plan Asia Investment Fund with CIC

Targets are companies that sell in China

A stock board in Shanghai. (Photo: AP)

BlackRock is said to be planning to launch an Asia investment fund together with China Investment Corp. (CIC), China’s sovereign wealth fund, to seek out Chinese companies as well as companies that sell in China.

Bloomberg reported late Wednesday that plans were for both BlackRock and CIC to provide capital for investments. An unidentified source said that the fund would be managed by Liu Erh-fei, who would leave his position as chairman of Bank of America Corp.’s brokerage operations in China to do so.

In a conference call last year, Laurence D. Fink, chairman and CEO of BlackRock, said that the firm was interested in expanding in Asia and investor deposits there were “slower than we would like.”

Fraser Howie, a Singapore-based managing director at CLSA Asia-Pacific Markets, a unit of Credit Agricole, and co-author of the book “Red Capitalism” on China’s financial system, said in the report, “BlackRock is partnering up with one of the biggest sovereign wealth funds, a big name with big connections, someone who will open doors and raise their profile. CIC is looking to diversify the way it invests, basically tying up with an established partner to try to do more things.”

An earlier Financial Times report about the fund was cited quoting Hu Bing, a senior CIC official, who spoke of the fund at a conference in Beijing; other unidentified sources were also mentioned.

In that report, the primary focus of the fund was said to be on companies outside of China that have technologies or resources useful to the country. The fund could also, for example, co-invest with Chinese companies in their international acquisitions or take stakes in the Chinese operations of multinational companies.

As of the end of 2010, CIC’s most recent annual report said that it had some $410 billion in assets, up from its setup amount of $200 billion from the Chinese Ministry of Finance. Also in 2010, it recorded an 11.7% return on its investments, compared to the MSCI World Index, which gained 9.6%. It has been buying up stakes in numerous ventures throughout the world.